«Commission Cut» round table: expectations of agent commission elimination by airlines

On September 27th, the Moscow Garden Ring hotel hosted «Commission Cut» panel discussion, which was organized by the editorial office of Buying Business Travel Russia electronic magazine with the informational support of the Russian Association of Business Travel. The participants were many Russian and foreign experts, including Aeroflot, Air Berlin and Turkish Airlines representatives, various travel agencies and lead TMCs — Aero Club, Continent Express, HRG, ZCTS-Egencia Russia and corporate buyers — a total of more than 50 participants. The meeting was moderated by Winfried Barczaitis, independent consultant.

It is to be recalled that starting from June 1st, Aeroflot, the largest Russian air carrier, has set the new size of basic agent commission — 4%, making it the same for all service classes. The carrier plans to totally eliminate the commission after January 1st. Buying Business Travel Russia editorial office has devoted an article to this issue, which analyses in detail all pressing problems caused by the changes in financial relations between carriers, travel agencies and corporate buyers: «Agent commission cut by airlines: causes, reactions, market forecasts».

«The market is volatile: some airlines have reduced agent commission and some have kept it on the previous level», discussion participant Olga Singh, key client manager in Air Berlin office in Russia notes. — I suppose, TMCs will find it really hard to work in such conditions: it would be much more convenient for them if airlines had a universal approach. Besides, Aeroflot is going to set a new level soon, and our travel market (it refers to TMCs, in the first place) will change dramatically.

Tatyana Ovchinnikova, congress manager in Bayer, who also took part in the panel discussion, noted, that the issue of agent commission elimination is rather painful for corporate buyers: «It is important to understand what mutual efforts we can make in future in order to minimize risks. The recent developments do not let us plan budgets properly and require a considerable labour input into contract revision. Of course, as a potential and active market participant, our company is worried about the future of TMCs. The problem of commission cut is being discussed on the sidelines, and this open discussion with the participation of leading market representatives organized by BBT-Russia has been the first so far».

Aeroflot was represented at the meeting by Anastasiya Shalnova, head of the carrier’s corporate department: «Aeroflot pursued the idea of commission cut and elimination for several years, but this step was postponed for several reasons. Mainly because of impossibility to develop a bonus motivation scheme for travel agencies. No doubt, participation of BBT-Russia in the panel discussion has had a beneficial effect on the relations between our company and corporate clients. It was useful for us to hear the main questions agents and clients are worried about, to speak about the reasons for the commission cut and about the advantages corporate buyers would get after these changes».

During the discussion TMC representatives gave a warning that clients should be prepared to a fare rise as the result of the carrier’s actions.

«Eventually, all costs will be shuffled off on the customer, i.e. the corporate buyer» — general director of Continent Express Stanislav Kostyashkin said. In his opinion, Aeroflot’s steps can hardly be considered consistent.

«For example, before cutting the agent commission Canadian carrier Air Canada excluded lemons from its menu and thus saved 5 million Canadian dollars! It is the same as 15 kopecks in your pocket. That is, Aeroflot should have started saving on lemons and before getting engaged into all these perturbations», Mr Kostyashkin said.

General Director of «Aero Club» TMC, Denis Matioukhin, noted, that most corporate clients had suspended their tenders. They were either postponed till the end of this year or till the beginning of the next year in order for the companies to have a chance to work in the conditions of zero commission themselves and to find out what average fare would be set by the market after the commission elimination.

«I do not understand why the market is so agitated», Marianna Uspenskaya, director of strategic purchase, business travel and marketing in Siemens noted in her turn. «This is not the first case of commission cut by Aeroflot. So everything that is going on now is unexpected, on the one hand, and quite anticipated, on the other. It is evident that agent commission was included into the ticket price and the company paid for it one way or another. If Aeroflot reduced fares now, it would be great. And we are looking forward to a new offer from the carrier, which will hopefully differ from the last year offer when business terms worsened significantly».

In her final speech Ms Shalnova assured the panel discussion participants that all their requests had been heard: «We will try to continue our work to correct the agent commission. Aeroflot is now elaborating a new regulation with a new discount scale and new business terms. As soon as it comes into force, and I hope it will happen before 2014, we will be able to offer even better conditions».

In the opinion of Elena Leontyeva, corporate relations and protocol specialist in Sakhalin Energy Investment Company Ltd., the panel discussion was very useful. «In the first place, I would like to thank the organizers for the opportunity to get acquainted with Aeroflot representatives. Unfortunately, the company’s call centre is the only communication channel with the carrier.

It would be interesting to know the position of travel agencies. We can not expect them to decrease rates, so we will get ready for a rise. The fares are unlikely to stay on the previous level, as there is a possibility that service level will drop in this case. And this is unacceptable. But at the same time we hope that fare growth will be justified».

«The issue is relevant to all of us: corporate buyers, travel agencies and air carriers», Angelika Snitko, congress manager in Bayer stressed. «So my big thanks are to BBT-Russia for this lively and necessary threelateral dialogue. I can say for sure, that we will not purchase air tickets from airlines directly in the near future, we do need help of a travel agency. Aeroflot may have cut commission to optimize air fares. But the facts suggest the opposite. As before, the carrier’s air fares are high compared to other airlines».

«Yes, we did have a meeting and a discussion», Vadim Ulyanov, deputy director of Alliance Avia agency shared his impressions of the panel discussion. «But the market is going to be volatile. I wish all air carriers eliminated their commission by Aeroflot’s example, so we all then would have gone through it at once. Our company started explaining the situation to corporate buyers in the beginning of summer and we faced irritation even then. Clients do not want their costs to grow. In my opinion, the main thing TMCs could do now is persuade their client in the necessity to pay for service, TMCs should not to suffer losses in order just to keep their clients».

Марина Осипова (http://buyingbusinesstravel.com.ru/)